Your point stands, but most thefts occur on third party sites/applications where the address of the coins and their private key are stored in a central location. Owners of the bitcoin should transfer their coins to a private wallet.

I don't understand how so many sites can't use password hash generation to secure the private keys, or something to keep it more secure. The first link you posted was a site run by an 18 year old.

Sorry to digress a little, but I'm sensitive on age issues :)

Pinkie Pie won his first $50k award by creating a 0-day sandbox escape on Chrome, by chaining 10 different vulnerabilities. He was 19 (now almost 21). Two years before, at 17, he released jailbreakme.com, all by himself, which was a 0-day able to jailbreak all iOS models shipped to date by just visiting a website.

Age means nothing by itself, but the point is correct. The problem is that we don't know how much we can trust bitcoin site owners, as most of them are relatively new with no history to inspect, closed source, and sometimes even run by anonymous users whose experience we can't inspect.

Anecdotes don't negate stereotypes, which are themselves generalizations across numerous anecdotes. And stereotyping is not by itself an invalid source of information, just less reliable than, say, a study. Everyone knows one person who negates a stereotype -- any stereotype. The existence of that person doesn't reduce the usefulness of that stereotype.

Sure, there are 18 year olds with impressive technical chops.

But do you know _anybody_ who would deposit money in a bank run exclusively by an 18 year old?

Coding skills can be created and honed by highschoolers - business, legal, and commercial experience - very much less so.

I think any skills can be created and honed by highschoolers.

But I think it's extremely rare in the cases you mentioned.

the question is, if they really know if he/she is 18 year old or something.

Outliers exist, this doesn't make them likely, age does matter far far more often than not. Generalizations have value, but they're not expected to always be true.

Sorry, didn't mean to put down the skills of young people! I'm 28 and I work on lots of security related systems, and although I understand most all of it, I wouldn't attempt to build a Bitcoin exchange without someone with years and years of hardened workplace experience. That's all I meant ;)

This is a good point and one that I considered and wish I followed up on. I'm in the "support queue" with Coinbase right now because they absconded with 10% of my bitcoin holdings for no discernible reason. In case you're concerned, I'm not the one with $150M in bitcoin - it was 1 btc that went missing (greatly appreciated in value from when I acquired it).

Because "online wallet" sites are the sort of bad idea that _needs_ to have access to the private keys. If you can spend bitcoin out of an "online wallet", the person in control of the software managing that wallet _does_ have access to your bitcoin. Even if they've tried to set things up "securely", the very best they can do is achieve Lavabit levels of security - if they (or someone coercing them) wants to, they'll get full access to your funds anytime you try to access them.

Think of them as like keeping your change on the bar - the security relies _purely_ on social conventions encouraging the bar owner, bar staff, other customers, and your friends to not take your money.

You would no more store your weekly pay, your rent money, or your new car savings on the counter at a bar - why the hell are people storing those sorts of values of bitcoin in other people's webservices?

Sure, online wallets might be _useful_, but anyone keeping any more value than they can afford to lose in one is insane (or, less critically, very poorly informed).

True.

I may be wrong here - but is the private key only required to send the money? So, if the user kept the key and it wasn't recorded on the server...or if they use some type of password hash for encrypting it, then there wouldn't be hundreds or thousands of wallets stolen at once. The user would enter their password when they want to transfer funds, the hash is calculated, private key decrypted, transaction made, and the private key is never recorded anywhere.

But, this would require the user to NEVER forget their password, or else they lose their money.

If the user kept the secret key, that's not much of an online wallet - you might as well just use your secret key at home and send it directly yourself. They could encrypt it with a password or a pin that isn't saved on their site so that you would have to enter it to decrypt the secret key. That still counts on the site not just lying and keeping it or you getting it keylogged or otherwise compromised on your side. Many online wallets do nothing of the kind, they simply have the secret key and use it to send. Someone with your password or access to the site could do the same. It's the same as a normal bank really, you have no physical/technical control over what they or someone who snuck into the bank does. You can control your access credentials (passwords, cards, account numbers, ID info, etc) and that's good and well, but there's nothing preventing it from disappearing on their side besides what they (not you) do for security.

It's possible to sign transactions offline, so that the private key never touches a device that's connected to the internet. Check out http://www.bitcointrezor.com/

How about the users keeping the key and supplying each time its need from a separate secure app? And that app wouldn't even contain the complete key, but requires they supply the last three digits each time. And they can tattoo that somewhere on their body.

It's well-known that you can at least secure your bitcoins as well as you can secure gold, if you use cold wallets.

The advantage, however, is you don't have to worry nearly as much about the security of a transaction (moving it from one place to another)

It has been demonstrated that:

1) gold can be stolen due to mistakes

2) bitcoin can be stolen due to mistakes

but this does not mean that it is impossible to avoid having either stolen.

I agree that long term storage of both of these can be done very securely, but the risk for both is when trading or using them. Additionally, Bitcoin does require a lot of worry about security - how many people do you think have airgapped wallets?

Aren't the facts that you shouldn't store Bitcoin at exchanges, should use an airgapped storage mechanism, and are otherwise out of luck if your computer is compromised, enough to demonstrate that you also have to worry a lot about the security of Bitcoin transactions? Your stack of gold ingots won't vanish if you take one from the pile in your safe, but your Bitcoins can if you don't take stringent precautions.

If you view a Bitcoin transaction as only what happens on the blockchain, you're missing the context of where it occurs - which gives both gold and Bitcoin risk.

Good point, the minimum security of Bitcoin is that of gold; i.e. a safe guarded by people with weapons.

But since Bitcoin is digital, its maximum security is far, far higher. Your private keys can be encrypted and safely stored with any desired level of redundancy. Paper wallets are a big step backwards.

Also, if secret sharing is used, Bitcoins cannot be stolen unless the attacker gets to k of the n involved parties.

Not really. It is much easier to lose or make illegible a piece of paper or data than it is to lose large heavy gold or to damage the gold to a degree that severely reduces its value.

OTOH, its hard to make redundant copies of a gold bar that retain the full value of the original so that if the original is damaged, nothing is lost.

Actually, you could--you could irradiate the gold to the point where decontamination would cost on the order of the worth of the gold itself.

I don't know about you, but no, I can't do that.

upvote for mentioning the evil scheming of a Bond villain in a serious conversation as a serious answer :)

No one said it was impossible to damage gold (there are easier wayd than to make it radioactive).

It's just much harder compared to doing comparable or greater value destruction to a bitcoin address, especially accidentally.

The difference is Bitcoin can be secured much more cheaply than gold. You can't encrypt gold, setup "n-of-m" multisig transactions, etc. Unless you want to transport gold yourself you're always going to have to trust someone.

Hardware wallets should help immensely as well.

From where I stand, this seems to be true of Bitcoin as well. I've never had any Bitcoins personally, but don't you have to store them in a wallet, which you're either going to have to worry about backing up, keeping secure, etc on your own. Or you're going to have to trust someone else to do it for you.

There is a difference in how the two scale, because one is physical.

Adding a BTC to a transaction doesn't really require any additional infrastructure. But once you've packed your first tanker with gold, you kind of have to hire a second boat.

Given the way each scales, it seems that BTC transfers are easier, at least at some values.

There is not enough gold in the whole world to fill up a tanker.

The word "tanker" was evocative, I wouldn't get hung up on it.

All I was saying was that physical stores of value increase in awkwardness (principally through weight and volume) when you increase their number, not so for digital.

Challenges in movement of large sums of gold: http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...

Here's what $300 Billion in gold looks like: http://www.celebritynetworth.com/articles/entertainment-arti...

(Note that it would be harder to transport, than, say, the amount of gold one can fit in a pocket.)

You can also store it physically, like on a piece of paper I believe. Or on a USB.

Yep: https://blockchain.info/wallet/paper-tutorial

As with _all_ security, there's a tradeoff between security and convenience. Inline wallets are spectacularly convenient - and guess what that implies security-wise?

Paper wallets are much more hassle. But a paper wallet in a bank vault is arguably up there with the most secure bitcoin storage techniques.

As the stored value of your bitcoin varies - so should your security requirements. If I need to keep under $100USD available to pay for my anonymous vpn or my torrent-box vps - an online wallet (who's operator could make off with my half or quarter of a bitcoin at any time) might be a sensible choice. If I'd been mining bitcoin at a reasonable rate since 2009 and was sitting on a house-worth of bitcoins, I'd make a _very_ different choice.

Consider the value of your wallet(s) - if they were piles of $50 notes, how much would you spend securing that? Would you leave it in your pocket? Hide it under you mattress? Buy a lockbox or a safe for your home? Rent a safe deposit box? At what stage is a never-internet-connected laptop a perfectly sensible expense to incur? I'd suggest a lot of people I see posting in forums about how much they lost in onine-wallet-hack-de-jour who should be kicking themselves for not having a dedicated $300 laptop fr storing their wallets on.

>someone should make an index of how many Bitcoin threads hit the front page of HN per day

Something like that: http://influxdb.org/blog/visualizing_bitcoin_post_frequency_... ?

Awesome! Thank you, I was hoping someone else would have had the same idea.